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April 8, 2022

EDITOR

3 min read

Revenue collection food for thought

Revenue collection food for thought

LRA Commissioner General, Thabo Khasipe

Story highlights

  • Everyone must pay their dues to broaden tax base
  • Latest developments point to a government-driven growth model

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IT is remarkable how the Lesotho Revenue Authority (LRA) has broken its last performance amidst growing pessimism brought about by the Covid-19 pandemic.

Domestic revenue performance driven by stable personal income tax revenues, VAT, and water royalties, all indicate how milestones could be achieved with the limited resource base.

It is imperative that everyone pays their dues to broaden the tax base, improve tax administration, and increase compliance if all opportunities are to be exploited to maximize resources.

For a while, we have been worried over volatility and falling Southern African Customs Union (SACU) transfers and the recent performance by the tax collector gives us renewed hope.

The enactment of the VAT Amendment Bill this week has also marked strides made by our legislators to maintain the integrity of existing taxes and strengthening the tax system to guard against international tax avoidance.

While it should develop a reform plan for improved revenue administration, it should also revive a stagnating economy estimated to have contracted by almost 10 percent since 2016.

Latest developments point to a government-driven growth model, which should be pursued further for sustainable and inclusive growth in concert with the private sector.

A bloated government expenditure in paying civil servants still constrains fiscal policy objectives but a robust private-led economy with grants such as the US Millennium Challenge Corporation should fill holes in public financial management.

The high unemployment figures, which also contribute to persistent high public expenditures with transfers to hand-outs, have hampered efforts aimed at growing the economy.

A sterling LRA’s performance can only inspire private-sector players such as banks and other money lenders to ease barriers to accessing finance and financial intermediation to rekindle business activity.

It cannot be overemphasised that the largely foreign-owned banking sector is well capitalised and liquid but plays a limited role in intermediating credit, particularly to micro, small and medium-sized enterprises.

While corruption coupled with government arrears create liquidity shortages, the tax reforms have come at the right time to improve the business environment, high credit and setup costs.

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In a country facing all sorts of unemployment from structural to underemployment, lack of skills and limited financial education, we hope other accompanying legal frameworks will further cement a healthy business environment for varied revenue sources.

Ahead of the 2022 general elections, a significant percentage of the revenue collection will be channelled to drive the political campaigns and election process, and we just hope democracy will prevail.

Otherwise, on-going fraud cases pursued by government against its employees highlight the commitment towards law enforcement and the power of the justice system. 

An uproar over government’s deficit with spending supported through growing domestic and external loans, arrears, and a drawdown of government deposits, should also not be ignored.

Legislators voted into power with the expectation that they will improve the standard of living, should not disappoint but work harder to creating a better Lesotho for all that live in it.

The Russia/Ukraine war has raised commodity prices such that the poor are already feeling the pinch of the skyrocketing fuel prices and we all look forward to a truce, peace and stability in the whole world.

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